Prime Minister David Cameron announced the agreement between EDF and China General Nuclear Power Corporation (CGN) to build a nuclear power plant at Hinkley Point, Somerset.
The French state-owned EDF said the final cost would be 18 billion pounds with state-owned CGN to pay 6 billion pounds for one-third of it.
"This is a historic deal which will lead to affordable power," said Cameron after a meeting with the Chinese leader at Downing Street.
The agreement also set up a wider UK partnership to develop new nuclear power stations at Sizewell and Bradwell.
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While they have reached "Strategic Investment Agreements" for all three plants, only Hinkley has a target date - it is supposed to start generating in 2025.
The meeting with Cameron followed a galabanquet at Buckingham Palace last evening where Kate, Duchess of Cambridge proved a hit with her striking red dress and diamond tiara borrowed from Queen Elizabeth II.
Xi's milestone UK trip is dominating discussion on Chinese micro-blogging site Weibo, where it has been the biggest trending topic for three days.
The royal couple joined the visitors at a creative industry event to celebrate cultural collaboration between the UK and China.
Xi and Peng also visited Imperial College today with the Duke of York and the Chancellor to see robotic arms that carry out surgical operations on patients.
The Bank of England has signed an agreement with the People's Bank of China to renew a currency swap line worth up to 35 billion pounds over the next three years.
In recent years, the City of London has become the largest centre of trading in China's Renminbi currency outside Asia.